Managing Life, Career, and Money in a Savvy Way!

Forced Savings Plan

Last year we were really motivated to save up for house purchase. It was exciting to see a set percentage go to our savings account, so that one day we could buy our very first house. The down payment savings account increased every month little by little. The goal motivated us to watch our spending.

Now that we have bought a house we need new goals to motivated us again. Especially me. I like goals. Without goals I tend to just drift away aimlessly.

For us, it’s much easier to save an allocated amount every month. We are not very good at watching our spend and hope we come under in order to meet our budget.

So our plan this year is to set automated saving withdrawals every month.

How does thiswork?

For example, one of our goals this year is to maximize our retirement contributions. I already have a set percentage being withdrawn from my paycheck that goes straight to my 401K. Last week I also set up a monthly ROTH IRA contribution with Vanguard. This will ensure by the end of 2013, I will have my ROTH IRA maximized. My husband does not have a retirement plan available through his work. I’m going to set up a Traditional IRA with Vanguard. Every month a set amount will be withdrawn from our savings account to the Traditional IRA. This will ensure have retirement covered.

I’m considering starting a brokerage account with Vanguard (After-Tax) and having a monthly contribution go to a set of mutual funds. This probably won’t be a huge amount but at least I know it’ll be set aside for our future.

My husband and I have been talking more and more about financial independence. We don’t want to be stuck in the grind forever working for the man. One day we hope to have the freedom to say F*** You!

A forced savings plan is one way to get there. It’s also psychological. Just like every month I make sure all our bills are paid, I will make sure there’s enough in the account for our contributions to be withdrawn from on a periodic basis.

I have found myself buying things for our house and I realize when start making updates that the house needs (remember, it’s a fixer upper), our costs will be higher than when we were renting an apartment.

Have you started automatic savings? Has it been helpful so far?

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Sounds like a good plan! My 401(k) is on auto-pilot. I usually set aside my Roth IRA contribution for the next year or the current year with my last bonus for the year. Paying off my mortgage is the top priority after the 401(k) since that saves so much taxes and I had that on automatic payments for a while, but I eventually stopped it because it was making it harder to add more some months. If my top priority wasn’t paying off the mortgage, I would definitely be direct depositing part of my paycheck to Vanguard!

I don’t really “get” IRAs. Do you have to have minimums to open them?
I read Ramit Sethi’s “I will teach you to be rich” and that was such a good book for me to read. The less I have to think about my money the better.

Right now we’re on debt-payoff mode but after my high-interest debt is paid off, we’re looking at splitting our large debt payoff into three categories, with one of those being saving towards a house. I totally understand the need for financial goals, it’s so easy to waste money on frivolous things if there’s no goal to save to.

No investment is
100% safe that is just impossible but it is possible to divert some of the
risk away by diversifying your funds, and to do that first you need to know
what other funds are out there. i found an article that has several of the
main fund types that can be used in investing athttp://www.mutualfundstore.com/investing-education